N190b debit for T-Bills auction sustains interbank’s high lending rates

Lending among banks at the interbank market went higher last weekend as the liquidity tightening policy of the Central Bank of Nigeria (CBN) remained full “throttled.”

While there were no new Treasury Bills (T-Bills) offering last week, CBN started the money market activities with the debit of financial institutions’ accounts to the tune of N190 billion for successful bids executed after the three-day holiday to mark Eid al-Fitr.

The action, consequently tightened liquidity in the market, making the week’s opening balance estimated at N41.3 billion insignificant for transactions’ demand and stoking rate hikes.

The interbank lending instruments- Open Buy Back (OBB) and Overnight rates in reaction to market dynamics, ended the week on higher notes at 20.8 per cent and 22.8 respectively.

Before the take off of the new flexible rate policy, banks’ treasurers had requested a persistent liquidity management as a foil to any Naira-induced speculative attack on exchange rate.

OBB and Overnight lending rates had trended at double digits on all trading days last week, especially with the debits, which sent strong signal of low level cash in the system.

The upward trend in interbank lending rates rose from 7.5 per cent and 8.8 per cent to 16.5 per cent and 18.2 per cent respectively on Monday and moved to 17.5 per cent (OBB) on Tuesday, while Overnight rate eased 2bps to 18 per cent.

In the middle of the week, OBB rate dropped 0.3 per cent, while Overnight rate inched 0.8 per cent higher, eventually settling at 18.2 per cent and 19.0 per cent respectively on Thursday.

Average rate in the T-Bills market also trended higher than previous week’s levels, as the market reacted to the stop rates at the primary market auction, in addition to the system liquidity levels during the week.

“This week, we expect money market rates to remain in the double digits. There is a net T-bills maturity of N128 billion and a scheduled rollover of the same amount expected on Thursday.

“We expect the auction to be oversubscribed as investors with unsuccessful bids at Wednesday’s bond primary market auction redirect their attention to the T-bills auction, considering the high stop rates at the previous auction.

“Thus, we think the Apex Bank may allot more than the offered amount,” Afrinvest Securities Limited said in a note to The Guardian and this may not be unconnected with the drive to keep money in circulation in check.

The Naira lost it foothold against the dollar last week, which it has maintained since the introduction of the new foreign exchange policy regime.

The local unit depreciated at both the interbank and parallel market, exchanging N282.47/$ on Monday; and N282.67/$ on Tuesday from last week’s N282.02/$ and started the major decline by Thursday at N283.77/$ and N292.25/$ on Friday.

Similarly, the Naira weakened at the parallel market for most of the week. On Monday, the Naira fell to N353/$ from N352/$further weakening to N357.00/$ by midweek before closing at N365/$ on Friday.

Similarly, the Naira weakened at the parallel market for most of the week, starting on Monday at N353/$ from N352/$, weakening to N357/$ by midweek and closing at N365/$ on Friday.

Meanwhile, the second futures contract on the FMDQ OTC Futures market was sealed last week, between CBN and Stanbic IBTC worth $60 million Naira-settled in 10 months (APR 26 2017) at N210/$.